Part 6Venture capital trusts

Chapter 2VCT relief

Entitlement to relief

261Eligibility for relief

1

An individual (“A”) is eligible for VCT relief for a tax year if—

a

a VCT issues eligible shares to A in that year,

b

the VCT issues the shares for raising money, and

c

A subscribes for the shares on A's own behalf.

2

The amount in respect of which A is eligible for VCT relief for the tax year by reference to any shares is the amount subscribed by A for the shares.

3

A is eligible for VCT relief by reference to any shares only if—

a

the shares are both subscribed for and issued—

i

for genuine commercial reasons, and

ii

not as part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax, and

b

A is at least 18 years old when the shares are issued.

4

A is not eligible for VCT relief by reference to any shares if they are treated as issued to A by virtue of section 195(8) of FA 2003 (tax treatment of disposal by company of its own shares).

See section 271(4) for provision requiring the giving of notices about the effect of this subsection.

262Entitlement to claim relief

1

An individual (“A”) who is eligible for VCT relief by reference to shares issued in a tax year is entitled to claim VCT relief for that year.

2

A is entitled to claim VCT relief in respect of the amount on which A is eligible for VCT relief by reference to all or some of the shares.

This is subject to subsection (3).

3

A is not entitled to claim VCT relief for any tax year on an amount of more than £200,000.

263Form and amount of relief

1

An individual who—

a

is entitled to claim VCT relief for a tax year, and

b

claims such relief for the year on any amount,

is entitled to a tax reduction for the year.

2

The tax reduction is equal to 30% of the amount in respect of which the claim is made.

3

The tax reduction is given effect at Step 6 of the calculation in section 23.

264No entitlement to relief if there is a linked loan

1

An individual is not entitled to VCT relief by reference to any shares (“the relevant shares”) if a linked loan is made by any person, at any time in the relevant period, to the individual or an associate of the individual.

2

References in this section to the making by any person of a loan to an individual or any associate of the individual include references—

a

to the giving by that person of any credit to the individual or any associate of the individual, and

b

to the assignment to that person of any debt due from the individual or any associate of the individual.

3

In this section—

  • “linked loan” means a loan which—

    1. a

      would not have been made, or

    2. b

      would not have been made on the same terms,

    if the individual had not subscribed for the relevant shares or had not been proposing to do so,

  • “the relevant period”, in relation to VCT relief in respect of any shares in a company which is a VCT, means the period—

    1. a

      beginning with—

      1. i

        the incorporation of the company, or

      2. ii

        if later, the date two years before the issue of the shares, and

    2. b

      ending immediately before the fifth anniversary of that issue.

265No entitlement to relief which would have been lost if it had already been obtained

An individual is not entitled to VCT relief by reference to any shares if circumstances have arisen which would have resulted in the withdrawal or reduction of the relief, if that relief had already been obtained.